China has a set of advantages that make it a preferred destination for manufacturers. An immediate boycott may not be viable.
The Galwan Valley faceoff between India and China that led to 20 Indian soldiers getting killed has reignited calls for a boycott of Chinese goods in India. Social media was abuzz with people destroying Chinese-made electronics goods like televisions and mobile phones.
However, a complete boycott of China-manufactured goods on an immediate basis is not viable. Making India an alternative manufacturing hub of electronic goods would take at least five to seven years, say industry players.
Here is a look at what makes China the most-preferred destination for electronic manufacturers.
Like India, China also offers a 25 per cent corporate tax rate. But this is where the similarity ends, and the ‘China attraction’ begins.
For companies and sectors dealing with technology products and electronic appliances like smartphones, TVs, refrigerators, washing machines and air-conditioners, China offers further tax breaks and incentives. This effectively brings down the tax rate to 15 per cent for select entities.
Further, companies making clean-energy appliances, integrated circuit makers and high-tech enterprises can enjoy a minimum tax holiday of two years and a maximum of up to five years in China.
The ease-of-doing-business index is often used as a metric to judge which country is more business-friendly. China ranks 31 in the World Bank’s rating while India’s position is 63.
India lags far behind China in the time taken for setting up businesses, property registration and contract enforcements. China was among the top 30 countries on these fronts. Getting credit is an area where China lags behind.
Industry officials admit that it would take twice as much time in India for a final business permit. Hence, those with stretched wallets and paucity of time choose China for manufacturing.
China has created hubs for manufacturing companies. They include cities like Guangzhou, Tianjin, Qingdao, Ningbo, Shenzhen and Shanghai. Cheaper access to water, electricity and quick/efficient transport facilities are the highlights of these hubs.
India’s transport infrastructure suffers from many bottlenecks with respect to accessibility. Though Special Economic Zones were set up to attract manufacturing companies into the country, they have been successful only in a few states like Gujarat, Karnataka, Tamil Nadu and Uttar Pradesh.
Diluted labour laws
Lax enforcement of labour laws, child labour and non-payment of overtime wages are common at manufacturing facilities in China. While these are not laudable, the fact is they too have contributed to China’s manufacturing growth. India’s labour law prohibits child labour.
Fixed working hours, specific work conditions and unionisation are among the factors that dissuade electronics makers from shifting base to India.
Minimum wages in India are too low and ranges from Rs 150-300, depending on the location.
Every product has a 'Made in China' element
While there are electronics makers in India, key components are manufactured in China for the above reasons. For example, the open-cell panel in an LED TV is imported from China. Similarly, chipsets of mobile phones, and cooling components in refrigerators and air-conditioners that are made in India are imported from China.
Hence, white goods players are of the view that an immediate boycott would mean halting manufacturing of appliances in India.
According to the United Nations COMTRADE database on international trade, India imported electronic equipment, including finished goods and components, worth $19.97 billion in 2019.World Bank data shows that, in 2018, India’s total goods export was worth $322.29 billion. In comparison, China’s was $2.49 trillion. In finished goods, China is considered the world’s leading exporter of smartphones.